It is up there in part because OPEC threw in the towel and agreed to production limits. Unfortunately for OPEC, those limits don’t apply to US and Canadian shale producers. And the history of OPEC is that they all cheat like crazy, anyway.

There will be no end to oil production

I think it is entirely possible that we will see oil prices climb somewhat further by mid-year, possibly approaching $60, and then pull back as capped US production comes back online.

I also think that this year, we’ll start to see a new pattern: Production could keep rising even as prices fall. Conventional wisdom says that producers stop pumping at some point when it becomes unprofitable, but I think that is about to change.

New technology will lead to greater production and higher profits

If you are an oil producer—or really, any commodity producer—two things can improve your profit margin: higher selling prices for the resource you produce or lower production costs. Some combination of both works as well.

Now, selling prices are mostly outside the producer’s control, though adept hedging can help. Cost reduction is, therefore, the place to concentrate your attention. Back in 2015, I wrote about new drilling techniques and other technology that promised to bring oil and gas production costs significantly lower.

Now, in the last few weeks, people in the business have told me these technologies are moving rapidly toward deployment. They foresee considerably lower drilling and production costs by the end of this year.

I had a confidential briefing recently about some new energy production processes that are coming online in the oil patch. Let me just say that production from an oil well drilled with these new techniques is getting ready to increase substantially.

In some cases, the amount of oil produced per dollar spent on drilling is going to more than double. There are significant chunks of the petroleum-producing parts of the United States where $40 oil will not be a barrier to drilling and new production.

Eventually—in a few years—these techniques will begin to show up in wells around the world, and there will be an explosion of oil. Even as many oilfields dry up, there will be new fields developed from previously unprofitable sources.

This will have massive economic and geopolitical implications

This technology trend means that the current oil price range may well break lower—perhaps this year, but certainly within this decade—without energy companies losing profits.

Not every company will reap the rewards equally, of course; but the industry as a whole is excited. Energy exploration and production is quickly becoming a technology-driven industry with the US as world leader.

If Trump permits construction of more pipelines and natural gas export terminals, we could see North American exports rise considerably in the next few years.

It’s now clear to nearly everyone that U.S. President Trump intends to seek warmer U.S. relations with Russia, while putting China and Iran relations in the deep freezer. Trump has made no secret of this major shift in policy. It’s also clear that he sees China, very much like Obama, as a major threat to U.S. global leadership.

Trump has often stated that he thought the Obama sanctions on Russia was catastrophic for the U.S., resulting in only pushing Russia into an alliance with China, a fear that many noted policy experts have echoed. For Russian energy companies, it means the doors are cracking open again for business.

Russia is again a hot topic on nearly every news site. And the topic has become even hotter with the U.S. election of a Putin-friendly president, who seems ready to share responsibilities with Russia for organizing the world’s response to global terrorism.

In a world where Trump seems to have a strangle-hold on the daily news, his energy friendly policy ideas are well known: reducing regulations, opening restricted government land for leasing, rejecting climate change, and bringing back to life rejected pipelines such as Keystone XL.

But hardly anyone expected the announcement that rocked the entire U.S. establishment, the nomination of Exxon’s CEO, Tillerson as Secretary of State in the new Administration. Even veteran political analysts were caught off guard, unaware that for the first time an oil industry leader was being considered to take the helm at State. Further upsetting many Trump opponents is Tillerson’s long and successful relationship in Russia with President Putin.

Suddenly the world is full of angry politicians, some who hardly know Tillerson, others who have happily received donations from his company, now castigating this life long Texas Republican as a Putin-crony, despite the fact that his relationship with the Russian President was often stormy and contentious.

But for the oil industry Tillerson’s appointment went beyond their wildest dreams. With this single act, Trump has established that his Administration may be one of the most oil industry friendly in history.

For over a decade, Exxon has had large investments in Russia, starting out with the development of oil and gas reserves in the far Eastern region of on Russian Pacific Coast, in the frozen wasteland of Sakhalin Island. In partnership with Russian-controlled companies giant oil companies, the project started off well enough, with Exxon pioneering the discovery and development, with a ready and interested buyer in Japan close at hand, offering the second largest energy market in Asia. Solidifying the deal, two of Japan’s major oil companies became partners in the venture.

But soon thereafter, the Kremlin passed new regulations that restricted foreign companies from owning a controlling interest in Russian energy ventures. After months of painful negotiations, Exxon was forced to sell down its controlling stake and become a minority owner to its former junior partners, Gazprom and Rosneft.

Although forced to comply with the new rules, what Exxon had demonstrated was that it could open up the Russian markets to high tech western companies, and make billions in the process. Almost all the other western oil giants were soon to follow suit, including Shell, Chevron, Conoco, BP, Eni, and Total, bringing the finance and technology that Russia so badly needed for the development of large scale projects.

Consider that Exxon, with its deep pockets and more than twenty years of experience in the Alaskan Arctic, is the most technologically advanced oil company in the world. The company brought much needed technology to Russia, where it partnered with the Russian giant oil company, Rosneft, for Arctic drilling.

In their very first effort on the Russian Arctic shelf, where Exxon is believed to have invested around $1 billion, the companies struck oil in a reserve estimated to hold some 750 million barrels of oil, with a market value of some $40 billion, at today’s oil prices.

Consider the significance of that project to Exxon, with Russia, as the largest country in the world, laying claim to the largest section of the Arctic, a region estimated to hold some 35 percent of the world’s remaining energy reserves. With Exxon now emerging as the key energy developer of the Russian Arctic shelf, the company saw the potential for leap frogging its competitors in becoming the chief developer of Arctic energy sources.

Unfortunately for Exxon, the project had to be abandoned because of the onset of sanctions on Russia. It’s well known that Tillerson, who publicly objected to the sanctions, made his complaints directly to the Obama administration.

In his recent Senate confirmation, Tillerson voiced harsh criticisms of Russia, that some observers felt were only newly invented for the sole purposes of easing his confirmation. He took particular aim at the Russian take-over of Crimea. This, despite the fact that Exxon and Rosneft have plans to exploit development of the Black Sea’s vast offshore energy reserves, something that could never have been possible without a Russian Crimea that enabled Russia to lay claims to large territorial rights on the Black Sea.

He also responded that he would not attempt to ease U.S. sanctions against Russia. Yet, observers are also suspicious that he may never have to do so since the sanctions are due to expire in March. There is little expectation of sanctions renewal by the Trump Administration.

Instead, a major part of the Trump Administration foreign policy will be to normalize relations with Russia, while advancing oil industry interests. Tillerson appointment to the post of Secretary of State is seen by many as a key part of that strategy.

Conclusion

At base, a major part of the job of the State Department has always been as advance guard for U.S. business. In that sense, a businessman as Secretary of State makes some sense.

It also could make sense to have an oil industry leader at the helm when we consider that much of the geopolitics of the world revolve around oil, particularly in the hottest conflict areas of Eurasia, where the U.S. and NATO have been embroiled in war for the past generation.

As to his confirmation, it seems unlikely that the U.S. Congress, an institution much beholden to corporate donors, would reject the nomination of the current leader of one of the world’s richest and most powerful industries.

The fact that U.S. Senator Corker has announced that Tillerson’s appointment will come before the full Senate may be taken as a signal that the Senate means to confirm the oil executive even if the Senate Foreign Relations Committee votes against confirmation.

His confirmation could be seen as a Trump-sponsored “get out of jail card” for Putin. Already the EU seemed to be reading the writing on the wall. Suddenly Gazprom proposed pipelines that had been stalled for more than two years are being approved in Europe.

At a time of rising oil prices, Tillerson’s appointment will almost certainly spark renewed investor interest in Russian energy assets, particularly Rosneft, one of the most undervalued oil industry giant in the world. How undervalued? For comparison, consider the fact that although Rosneft’s reserves are greater than Exxon's, Exxon’s market value is seven-fold greater than Rosneft’s.

At the same time, as a state controlled company, Rosneft provides several advantages for Exxon, a company that has serious problems in replacing its reserves. These include Rosneft’s privileged, and exclusive right to reserves in the Arctic. Only Gazprom, the other state controlled energy giant, has similar exclusive rights, and is also likely to benefit from the Tillerson appointment.

HANOI (Reuters) - Vietnam on Friday said other countries should respect its legitimate right to drill for oil in its waters amid growing tension with China over energy development in the South China Sea.

The drilling began in mid-June in Vietnam's Block 136/3, which is licensed to Vietnam's state oil firm, Spain's Repsol and Mubadala Development Co of the United Arab Emirates.

The block lies inside the U-shaped "nine-dash line" that marks the vast area that China claims in the sea and overlaps what it says are its own oil concessions.

China on Tuesday urged a halt to the drilling.

"Vietnam's petroleum-related activities take place in the sea entirely under the sovereignty and jurisdiction of Vietnam established in accordance with international law," Vietnamese Foreign Ministry spokeswoman Le Thi Thu Hang said in a statement sent to Reuters.

"Vietnam proposes all concerned parties to respect the legitimate rights and interests of Vietnam."

This week, the BBC reported that Vietnam had halted drilling there after Chinese threats, but there was no independent confirmation and neither Vietnamese officials nor Repsol made any comment on the report.

Thomson Reuters data showed the drilling ship Deepsea Metro I was in the same position on Friday as it had been since drilling began on the block in the middle of June.

China claims most of the energy-rich South China Sea through which about $5 trillion in ship-borne trade passes every year. Brunei, Malaysia, the Philippines, Taiwan and Vietnam also have claims.

Oklahoma is being pummeled by earthquakes, a phenomenon scientists have strongly tied to wastewater injection and the practice of fracking.

A new study highlights just how strong that connection is.

According to the US Geological Survey, the earthquake threat level in some parts of the state may now be approaching the level for some parts of California.

Over the course of a few days in August, Oklahoma was pummeled by seven earthquakes.

The wave started on a Tuesday night, when five quakes struck the central part of the state in less than 28 hours. The shaking continued extended into the early hours of Thursday as two more hit.

Although none of those quakes was severe enough to cause significant damage, scientists are increasingly concerned about their cause. Rather than emanating from natural tectonic shifts deep inside the Earth, these temblors appear to be the result of human activity.

The authors of the latest paper, published this week in the journal Science, found that they could use the depth of the wastewater injection sites to roughly predict how big the earthquake they caused would be.

In other words, the deeper the injection site, the stronger the quake.

The researchers were confident enough in their assertions to make a recommendation:"Reducing the depth of injections could significantly reduce the likelihood of larger, damaging earthquakes," Thomas Gernon, an associate professor of earth science at the University of Southampton, wrote in an article for The Conversation.

Oklahoma's earthquake threat level is now predicted to be roughly the same as California

Until recently, earthquakes in Oklahoma were few and far between. In 2010, the state experienced just 41 tremors. By comparison, Southern California has about 10,000 earthquakes each year.

But that disparity may be shrinking.

According to a forecast from the US Geological Survey, the risk of a significant and damaging earthquake in some parts of Oklahoma is now roughly the same as the risk in parts of California.

"The chance of having Modified Mercalli Intensity VI or greater (damaging earthquake shaking) is 5–12% per year in north-central Oklahoma and southern Kansas, similar to the chance of damage caused by natural earthquakes at sites in parts of California," the forecast reads.

Over the past few years, Oklahoma has weathered hundreds of significant quakes— more than 900 in 2015 alone, according to The Conversation — as have parts of several other Midwestern states. The region is replete with eons-old fault lines that went quiet long ago, but wastewater operations appear to be re-awakening some of those faults.